UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended November 30, 2009.

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to ___________

Commission File Number: 000-52319

EXTERRA ENERGY INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)

Nevada 20-5086877
------ ----------
(State of Incorporation) (I.R.S. Employer Identification Number)

701 South Taylor, Suite 440, Amarillo, Texas 79105
-----------------------------------------------------
(Address of Principal executive offices) (Zip Code)

(806) 373-7111
--------------
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Act) [ ] Yes [ ] No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

7,331,146 shares of common stock were issued and outstanding as of January 14,
2010.

INDEX

Part I Financial Information

Item 1. Financial Statements (Unaudited)

Balance Sheet 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9

Item 3. Quantitative and Qualitative Disclosures About Market Risk 15

Item 4. Controls and Procedures 15

Item 4T. Controls and Procedures 16

Part II Other Information

Item 1. Legal Proceedings 16

Item 1A. Risk Factors 16

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18

Item 3. Defaults Upon Senior Securities 18

Item 4. Submission of Matters to a Vote of Security Holders 19

Item 5. Other Information 19

Item 6. Exhibits 20

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXTERRA ENERGY, INC.
BALANCE SHEETS
(Unaudited)

November 30, 2009 May 31, 2009
----------------- ------------

CURRENT ASSETS:
Cash and equivalents $ 23,579 $ 7,505
Oil and gas receivable 40,245 42,326
Prepaid expenses and other current assets 3,163 611
Notes Receivable 7,500 --
------------ ------------
TOTAL CURRENT ASSETS 74,487 50,442

OIL AND GAS PROPERITES, net - successful efforts
method 2,308,197 2,379,194
VEHICLES, FURNITURE AND EQUIPMENT, net 21,235 25,075
OTHER ASSETS 9,913 9,913
------------ ------------
TOTAL ASSETS $ 2,413,832 $ 2,464,624
============ ============

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,215,957 $ 1,042,749
Oil and gas properties purchase note payable 200,000 200,000
Convertible notes payable 367,500 367,500
Related party note payable 20,000 30,000
Bank Line of Credit 400,000 --
Other current notes 462,125 462,125
------------ ------------
TOTAL CURRENT LIABILITIES 2,665,582 2,102,374

NON-CURRENT LIABILITIES:
Asset retirement obligation 126,286 120,271
------------ ------------
TOTAL LIABILITIES 2,791,868 2,222,645
------------ ------------

STOCKHOLDERS' EQUITY:
Common stock: $0.001 par value 75,000,000
shares authorized: 7,051,279 and 7,036,279,
shares issued and outstanding, respectively 7,051 7,036

Additional paid-in capital 20,495,482 20,450,498

Retained earnings (20,880,569) (20,215,555)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 378,036 241,979
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,413,832 $ 2,464,624
============ ============

See accompanying notes to financial statements

EXTERRA ENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Months Ended For the Six Months Ended
---------------------------- ----------------------------
November November November November
30, 2009 30, 2008 30, 2009 30, 2008
------------ ------------ ------------ ------------
REVENUE:
Oil and gas sales $ 65,031 $ 80,931 $ 137,423 $ 274,177

OPERATING EXPENSES:

Lease operating expenses 85,573 76,842 108,327 165,600
Depreciation, depletion
and accretion 56,130 74,600 80,850 139,876
Impairment -- 1,207,558 -- 1,207,558
Consulting fees -- 137,210 -- 495,033
General and administrative 273,973 126,920 522,523 253,343
------------ ------------ ------------ ------------
Total Expenses 415,676 1,623,130 711,700 2,261,410
------------ ------------ ------------ ------------

LOSS FROM OPERATIONS (350,645) (1,542,199) (574,277) (1,987,233)
------------ ------------ ------------ ------------

OTHER INCOME (EXPENSES):

Interest expense (45,968) (34,983) (74,068) (69,966)
Debt Settlement Expense (16,669) -- (16,669) --
------------ ------------ ------------ ------------
Total Other Expenses (62,637) (34,983) (90,737) (69,966)
------------ ------------ ------------ ------------

NET LOSS $ (413,282) $ (1,577,182) $ (665,014) $ (2,057,199)

NET LOSS PER SHARE - BASIC
AND DILUTED $ (0.06) $ (3.14) $ (0.09) $ (4.20)

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC
AND DILUTED 7,051,279 502,071 7,050,418 489,654

See accompanying notes to financial statements

EXTERRA ENERGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2009 AND 2008
(Unaudited)

For the Six Months Ended
------------------------------------
November 30, 2009 November 30, 2008
----------------- -----------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (665,014) $(2,057,199)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion, depreciation & asset
retirement obligation accretion 80,850 139,876
Impairment of oil & gas property -- 1,207,558
Stock issued for services 45,000 344,983
Changes in operating assets and liabilities
O&G receivables 2,081 85,930
Prepaid expenses and other current assets (2,552) 8,495
Accounts payable and accrued expenses 173,209 148,627
----------- -----------
Net Cash Used in Operating Activities (366,426) (121,730)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Notes Receivable (7,500) --

----------- -----------
Net Cash Used in Investing Activities (7,500) --
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock -- 158,000
Borrowings on line of credit 400,000 --
Repayment on related party debt (10,000) --
Principal payments on long term debt -- (7,609)
----------- -----------
Net cash Provided by Financing Activities 390,000 150,391
----------- -----------

NET INCREASE IN CASH 16,074 28,661

CASH AT BEGINNING OF PERIOD 7,505 9,190
----------- -----------
CASH AT END OF PERIOD $ 23,579 $ 37,851

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ -- $ --
Income taxes $ -- $ --

NON-CASH INVESTING AND FINANCING ACTIVITIES
Stock issued upon cashless conversion of warrants
and options $ -- $ 498
Stock issued for prior year accounts payable $ -- 40,000

See accompanying notes to financial statements

EXTERRA ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Exterra Energy, Inc.
("Exterra") have been prepared in accordance with accounting principles
generally accepted in the United States of America and rules of the Securities
and Exchange Commission, and should be read in conjunction with the audited
financial statements and notes thereto contained in Exterra's annual report on
Form 10-K/A for the year ended May 31, 2009 filed with the SEC on October 21,
2009. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the consolidated financial statements which would substantially duplicate the
disclosure contained in the audited financial statements as reported in the 2009
annual report on Form 10-K have been omitted.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the
current period presentation.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. The Company has not yet established an ongoing
source of revenues sufficient to cover its operating costs and has defaulted on
certain outstanding notes payable, which raises substantial doubt about its
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company obtaining adequate capital to
fund operating losses until it becomes profitable and to settle or restructure
its outstanding past due notes payable. If the Company is unable to obtain
adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other
things, additional capital resources. Management's plans to obtain such
resources for the Company include obtaining capital from management and
significant shareholders sufficient to meet its minimal operating expenses.
However, management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - ASSET RETIREMENT OBLIGATIONS

The following is a description of the changes to the Company's asset retirement

obligations for the six months ended November 30, 2009.

2009

--------

Asset retirement obligations at May 31 $120,271

Additions for exploratory and development drilling --

Accretion expense 6,015
--------

Asset retirement obligations at November 30, $126,286
========

NOTE 4 - RELATED PARTY TRANSACTIONS

During the quarter ended November 30, 2009, Exterra paid $10,000 to ROYALCO
Financial Oil and Gas Corporation related to a note payable. As of November 30,
2009, the balance on the note is $20,000. ROYALCO Oil and Gas is a private oil
and gas company in Texas that is owned and controlled by Robert Royal, CEO and
Director and Todd Royal, President and Director.

NOTE 5 - DEBT

Debts outstanding at November 30, 2009 are as follows:

Balance Balance Maturity
Note 5/31/2009 11/30/2009 Date
- -------------------------------------------- ---------- ---------- ----------

Oil and gas properties purchase note payable $ 200,000 $ 200,000 07/15/2008

Convertible loans 367,500 367,500 06/30/2008

Note payable to Coventry Capital 462,125 462,125 05/07/2008

Note payable to finance insurance premium -- -- 10/31/2010

Note payable to related party 30,000 20,000 10/31/2010

Bank Line of Credit -- 400,000 08/01/2012

- --------------------------------------------------------------------------

Total $1,059,625 $1,449,625
==========================================================================

The oil and gas properties purchase note payable, the convertible loans, and the
note payable to Coventry Capital are in default as of November 30, 2009. As the
Company is unable at present to pay the balances due, we are seeking an
extension from the lenders. There are no guarantees these discussions will be
successful.

In September 2009, Exterra entered into a $10,000,000 bank line of credit. The
line of credit is subject to an initial borrowing base limitation of $1,475,000
and is secured by Exterra's interests in various oil and gas leases originally
acquired in October of 2007. The interest (5.5% per annum) is paid monthly on
the existing / average daily balance. The loan proceeds are to be used for oil
and gas investments, development of oil and gas properties and working capital
associated with operating oil and gas properties. As of November 30, 2009, the
company owes $400,000 on this line of credit.

NOTE 6 - STOCKHOLDERS' EQUITY

Common Stock

During the six months period ended November 30, 2009, the Company consummated

the following transactions (shares issued for services and fees have been valued

at the market price of the Company's stock on the date the equity issuance was

authorized):

06/26/2009 Issued 15,000 common shares valued at $3.00 per share in payment
for services and fees to third parties

NOTE 7 - SUBSEQUENT EVENTS

Subsequent to November 30, 2009, Exterra acquired a 1% gross interest in 17,000
acres off-shore Louisiana, in exchange for 250,000 shares of Exterra's
restricted common stock valued at $1.15 a share for a total value of $287,500.
However, Exterra will issue additional shares, causing the total number of
shares to be equal to $1,000,000 in the event that the company shares are not
trading at $4.00 per share 12 months from the date of the agreement. The
location is known as Marsh Island, with 109 miles of 3D Seismic Mapping and
Interpretation, an existing well that has recently been drilled and is scheduled
to be reworked and several drilling locations, from Hal McKinney, an Individual.
Exterra's Partner, who is the Operator and Major Interest owner is Dynamic
Offshore Resources, LLC, a Private Houston, Texas, based Company that primarily
operates in off-shore Gulf of Mexico properties.

Subsequent to November 30, 2009, Exterra issued 29,867 shares of common stock
valued at $2.25 per share for a total value of $67,201 in partial settlement of
litigation initiated by Exterra's former CFO.

Exterra evaluated its subsequent events through January 14, 2010.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE
LITIGATION REFORM ACT OF 1995. Statements contained in this filing that are not
based on historical fact, including without limitation statements containing the
words "believe," "may," "will," "estimate," "continue," "anticipate." "intend,"
"expect" and similar words, constitute "forward-looking statements". These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, events or developments to be
materially different from any future results, events or developments expressed
or implied by such forward-looking statements. These factors include, among
other, the following: general economic and business conditions, both nationally
and in the regions in which Exterra Energy, Inc. ("we", "Exterra" or "Company")
operates; technology changes, the competition we face; changes in our business
strategy or development plans; the high leverage of Exterra; our ability to
attract and retain qualified personnel; existing governmental regulations and
changes in, or our failure to comply with, governmental regulations; liability
and other claims asserted against us; our ability or the ability of our
third-party suppliers to take corrective action in a timely manner with respect
to changing government regulations; and other factors referenced in our filings
with the Securities and Exchange Commission.

Results of Operations

Three Months Ended November 30, 2009 and 2008

The following table sets forth the percentage relationship to total revenues of
principal items contained in the statements of operations of the consolidated
financial statements included herewith for the three months ended November 30,
2009 and 2008. It should be noted that percentages discussed throughout this
analysis are stated on an approximate basis.

Three Months Ended November 30,
2009 2008
------------------------ ------------------------
Amount Percentage Amount Percentage
---------- ---------- ----------- ----------

Total revenues $ 65,031 100% $ 80,931 100%

Total Expenses 415,676 639% 1,623,130 2006%
Total Other Expenses (62,637) -96% (34,983) -43%

Loss before income taxes (413,282) -636% (1,577,182) -1949%

Net loss $ (413,282) -636% $(1,577,182) -1949%

Oil and Gas Revenues

Revenues for the three months ended November 30, 2009 and 2008 were $65,031 and
$80,931, respectively. The decrease is due to the decline in commodity price and
decline in production resulting from the sustained decline in commodity pricing.
We expect our oil and gas revenues to decrease in the following months as oil
and natural gas prices have continued to decline.

Lease Operating Expenses

Lease operating expenses for the three months ended November 30, 2009 and 2008
were $85,573 and $76,842, respectively. The increase is due to current period
expenses consisting of costs incurred in connection with putting our oil and
natural gas properties into future production. We expect our operating expenses
to continue to grow as we repair and improve the wells we have purchased.

Depreciation, Depletion and Accretion

Depreciation and depletion expenses for the three months ended November 30, 2009
and 2008 were $56,130 and $74,600, respectively. The decrease in the
depreciation, depletion and accretion was due to the decrease in production from
the oil and gas properties from prior year acquisitions per above and due to
prior year oil and gas property value impairment resulting from a downward
revision of the reserve estimates based on the sustained decline in oil and gas
prices, which indicated a decline in the recoverability of the carrying value of
such properties.

Impairment of Oil and Gas Properties

Impairment expenses for the three months ended November 30, 2009 and 2008 were
$0 and $1,207,558, respectively. The decrease was due to prior period impairment
resulting from a downward revision of the reserve estimates based on the recent
decline in oil and gas prices, which indicated a decline in the recoverability
of the carrying value of such properties.

General and Administrative Expenses

General and administrative expenses for the three months ended November 30, 2009
and 2008 were $273,973 and $126,920, respectively. The increase is principally
due to the activities management is engaged to increase oil and gas producing
properties through bargain acquisition and management activities to settle debt
acquired by previous management. We expect our general and administrative
expenses to increase in the current year as the company grows through efficient
management.

Consulting Fees

Consulting fees decreased for the three months ending November 30, 2009 due
primarily to current management accruing salary which is included in general and
administrative expenses rather than receiving consulting fees for the management
of Exterra. We expect our consulting fees to remain consistent in the current
year as the company grows.

Interest Expense and Debt Settlement Expense

Interest expense for the three months ended November 30, 2009 and 2008 were
$45,968 and $34,983, respectively. The increase was due to additional debt
resulting from the bank line of credit entered into by Exterra. Debt settlement
expense for the three months ended November 30, 2009 and 2008 were $16,669 and
$0, respectively. The increase is principally due to management efforts to
settle debt acquired by previous management.

Net Loss

Our net loss for the three months ended November 30, 2009 and 2008 was $413,282
and $1,577,182, respectively. The decrease is primarily attributable to the oil
and gas property impairment of $1,207,558 recognized in the three month period
ended November 30, 2008 and efficient management controls in the three month
period ended November 30, 2009.

Six Months Ended November 30, 2009 and 2008

The following table sets forth the percentage relationship to total revenues of
principal items contained in the statements of operations of the consolidated
financial statements included herewith for the six months ended November 30,
2009 and 2008. It should be noted that percentages discussed throughout this
analysis are stated on an approximate basis.

Six Months Ended November 30,
2009 2008
------------------------ ------------------------
Amount Percentage Amount Percentage
---------- ---------- ----------- ----------
Total revenues $ 137,423 100% $ 274,177 100%

Total Expenses 711,700 518% 2,261,410 825%

Total Other Expenses (90,737) -66% (69,966) -26%
Loss before income taxes (665,014) -484% (2,057,199) -750%

Net loss $ (665,014) -484% $(2,057,199) -750%

Oil and Gas Revenues

Revenues for the six months ended November 30, 2009 and 2008 were $137,423 and
$274,177, respectively. The decrease is due to the decline in commodity price
and decline in production resulting from the sustained decline in commodity
pricing. We expect our oil and gas revenues to decrease in the following months
as oil and natural gas prices have continued to decline.

Lease Operating Expenses

Lease operating expenses for the six months ended November 30, 2009 and 2008
were $108,327 and $165,600, respectively. The decrease is due to the decline in
production resulting from the sustained decline in commodity pricing. We expect
our operating expenses to increase as we repair and improve the wells we have
purchased.

Depreciation, Depletion and Accretion

Depreciation and depletion expenses for the six months ended November 30, 2009
and 2008 were $80,850 and $139,876, respectively. The decrease in the
depreciation, depletion and accretion was due to the decrease in production from
the oil and gas properties from prior year acquisitions per above and due to
prior year oil and gas property value impairment resulting from a downward
revision of the reserve estimates based on the sustained decline in oil and gas
prices, which indicated a decline in the recoverability of the carrying value of
such properties.

General and Administrative Expenses

General and administrative expenses for the six months ended November 30, 2009
and 2008 were $522,523 and $253,343, respectively. The increase is principally
due to the activities management is engaged to increase oil and gas producing
properties through bargain acquisition and management activities to settle debt
acquired by previous management. We expect our general and administrative
expenses to increase in the current year as the company grows through efficient
management.

Consulting Fees

Consulting fees decreased for the six months ending November 30, 2009 due
primarily to current management accruing salary which is included in general and
administrative expenses rather than receiving consulting fees for the management
of Exterra. We expect our consulting fees to remain consistent in the current
year as the company grows.

Interest Expense and Debt Settlement Expense

Interest expense for the six months ended November 30, 2009 and 2008 were
$74,068 and $69,966, respectively. The increase was due to additional debt
resulting from the bank line of credit entered into by Exterra. Debt settlement
expense for the six months ended November 30, 2009 and 2008 were $16,669 and $0,
respectively. The increase is principally due to management efforts to settle
debt acquired by previous management.

Net Loss

Our net loss for the six months ended November 30, 2009 and 2008 was $665,014
and $2,057,199, respectively. The decrease is primarily attributable to the oil
and gas property impairment of $1,207,558 recognized in the six month period
ended November 30, 2008 and efficient management controls in the six month
period ended November 30, 2009.

Liquidity and Capital Resources

Pursuant to the recent and ongoing decline in the price of oil and natural gas,
the Company had exhausted its financial resources. Despite the collapse of the
worldwide financial markets the Company's management has acquired new financing
in the form of a $10,000,000 bank line of credit.

As of November 30, 2009, Exterra had cash of $23,579 and negative working
capital of $2,591,095. This compares to cash of $7,505 and negative working
capital of $2,051,932 as of May 31, 2009.

Debts outstanding at November 30, 2009 are as follows:

(1) Note payable to purchase oil and gas properties $200,000

(2) Convertible loans $367,500

(3) Note payable to Coventry Capital $462,125

(4) Happy State Bank line of Credit $400,000

(5) Note payable to related parties $20,000

Total debt outstanding - $1,449,625

(1) Principal and interest (10% per annum) on the note are payable on the tenth
(10th) day of each calendar month, beginning on January 10, 2007, in monthly
installments equal to the difference between the prior month's (i) income and
(ii) the royalties, severance, ad valorem, lifting and transportation expenses
directly related to the operation of the Pecos County leases. Each monthly
installment will be applied first to any outstanding and accrued interest and,
thereafter, to principal on the note. The entire principal amount outstanding
under the note and all accrued interest thereon was due and payable on July 15,
2008. The note payable is secured by the oil and gas properties and 360,000
shares of the Company's restricted common stock. The Company has accrued $70,027
in interest on the note payable as of November 30, 2009. As the Company is
unable at present to pay the balances due, we are seeking an extension from the
Lender. There are no guarantees these discussions will be successful.

(2) During the year ended May 31, 2007, the Company received $367,500 from the
sale of its Convertible Loans. The Convertible Loans were due June 30, 2008 and
bear interest at 10% per annum payable quarterly. In addition, 10% of the face
value of the Convertible Loans is due to the holders as a revenue sharing bonus.
This bonus is due from initial production revenue realized from the first six
months of net revenue from the University Lands, Pecos County, Texas.
Furthermore, 205,900 common shares in aggregate were issued as a bonus. These
bonus shares are restricted from sale for 2 years. The Convertible Loans are
convertible into common shares of the Company at $0.75 per share for a total of
476,667 common shares. The common shares from the conversion are subject to a
"pooling arrangement", whereby the shares will be released in equal installments
over a 6 month period, beginning May 31, 2008. The Company is currently
negotiating an extension with the Convertible Loan Holders. There are no
guarantees these negotiations will be successful.

Through November 30, 2009 a net revenue sharing bonus has not been paid as the
University Lands have yet to yield net revenue. The Company has accrued interest
of $67,070 at November 30, 2009 on the Convertible Loans.

The Company may force conversion into common shares. This will only occur if the
Company's common shares trade at $2.00 per share or more for a period of 90
consecutive days, or if the Company completes a stock offering for $3 million at
a price of $1.50 per share or higher.

(3) Principal and interest (18% per annum) due monthly in blended payments of
$20,000 commenced December 7, 2007. The loan is secured by certain oil and gas
properties and was due May 7, 2008. The Company has accrued $144,888 in interest
as of November 30, 2009. The Company is currently attempting to re-negotiate the
terms of the Loan. There can be no guarantees these attempts will be successful.

(4) $10,000,000 Happy State Bank line of credit. The line of credit is subject
to an initial borrowing base limitation of $1,475,000 and is secured by
Exterra's interests in various oil and gas leases originally acquired in October
of 2007. The interest (5.5% per annum) is paid monthly on the existing / average
daily balance. The loan proceeds are to be used for oil and gas investments,
development of oil and gas properties and working capital associated with
operating oil and gas properties. The loan proceeds are to be used for oil and
gas investments, development of oil and gas properties and working capital
associated with operating oil and gas properties. The Company has accrued $0 in
interest as of November 30, 2009.

(5) During the quarter ended November 30, 2009, Exterra paid $10,000 to ROYALCO
Financial Oil and Gas Corporation related to a note payable. As of November 30,
2009, the balance on the note is $20,000. ROYALCO Oil and Gas is a private oil
and gas company in Texas that is owned and controlled by Robert Royal, CEO and
Director and Todd Royal, President and Director.

Cash Flow from Operating Activities

For the six month period ended November 30, 2009, net cash used by operating
activities was ($366,426), versus net cash used by operating activities of
($121,730) for the six month period ended November 30, 2008. This increase in
net cash used by operations activities is primarily due to cash flow generated
from field operations due to decreased volumes and prices from production.

Cash Flow from Investing Activities

For the six month period ended November 30, 2009, net cash used in investing
activities was $(7,500), for a note receivable issued with 8% interest per annum
which matures September 25, 2010 versus net cash used by investing activities of
a ($0) for the six month period ended November 30, 2008. Our investing
activities were funded from the use of cash from borrowings on debt and
operations.

Cash Flow from Financing Activities

For the six month period ended November 30, 2009, net cash provided by financing
activities was $390,000, versus net cash provided by financing activities of a
$150,391 for the six month period ended November 30, 2008. The increase in cash
provided by financing activities was due to utilization of the new Happy State
Bank Line of Credit occurring during the six months ended November 30, 2009
versus 2008.

Subsequent Events

Subsequent to November 30, 2009, Exterra issued 29,867 shares of common stock
valued at $2.25 per share for total value of $67,201,in partial settlement of
litigation initiated by Exterra's former CFO.

Exterra evaluated its subsequent events through January 14, 2010.

Hedging

We did not hedge any of our oil or natural gas production during 2009 and have
not entered into any such hedges from November 30, 2009 through the date of this
filing.

Contractual Commitments

Information about contractual obligations at November 30, 2009 did not change
materially from the disclosures in our Annual Report on Form 10-K for the year
ended May 31, 2009 excepting the Happy state Bank line of credit discussed in
Item 2 - Liquidity and capital resources section above.

Off-Balance Sheet Arrangements

As of November 30, 2009, we had no off-balance sheet arrangements.

Related Party Transactions

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities
and expenses. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and
prices. We are exposed to risks related to increases in the prices of fuel and
raw materials consumed in exploration, development and production. We do not
engage in commodity price hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we
conducted an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO") of our disclosure controls and procedures (as defined in
Rules13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation,
the CEO and CFO have concluded that our disclosure controls and procedures were
not effective as of November 30, 2009.

(b) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no changes in our internal controls over financial reporting
that occurred during our fiscal quarter ended November 30,2009 that have
materially affected; or is reasonably likely to materially affect our internal
control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Material developments occurring in previously reported legal proceedings
involving the Company during the quarter ended November 30, 2009 are disclosed
in 1. and 2. below.

The Company is aware of the following pending litigation that could result in a
material loss:

At November 30, 2009, the following litigation is pending:

1. Cause No. 08-05-07052: Hope Drilling Company and Hope Workover Services,
Inc. vs Exterra Energy Inc.; in the District Court of Crockett County
Texas; 112th Judicial District
a. This is a suit on a debt in the amount of $21,331 plus attorney's
fees.
b. Management resolved this matter in the current reporting period
reaching a settlement which has been paid with Hope Drilling and
Hope Workover Services.

2. Randall K. Boatright v. Exterra Energy, Inc., in the 55th District Court in
and for Harris County, Texas
a. Plaintiff is a former officer and director of the Company and has
claimed the amount of $97,200 plus attorney's fees and interest
for past compensation owed and severance.
b. Management has resolved this matter. As of November 30, 2009,
Exterra had $92,200 recorded in accounts payable and accrued
expenses related to this claim. Settlement was achieved November
18, 2009. Payments totaling $5,000 have been paid towards
settlement of this claim as of November 30, 2009. Subsequent to
November 30, 2009, Exterra issued 29,867 shares of common stock
valued at $2.25 per share in partial settlement and has paid an
additional $5,000.

3. 0424864 BC, Ltd. and Gordon McDougall v. Exterra Energy, Inc., in the 151st
District Court in and for Harris County, Texas
a. Plaintiff is a former officer and director of the Company and has
claimed the amount of $132,800 plus attorney's fees and interest
for past compensation and severance.
b. An answer has been filed on behalf of the Company. c.
Management's intends to attempt to resolve this matter.

As of November 30, 2009, Exterra had $135,000 recorded in accounts payable and
accrued expenses related to this claim.

4. Planet United, Inc. v. Exterra Energy, Inc., in the 80th District Court in
and for Harris County, Texas
a. This is a suit on a debt in the amount of $250,000 originally due
July 17, 2008 and bearing interest at 10%. In addition, the
plaintiff claims they are owed a revenue sharing bonus of up to
$25,000 derived from the Company's University Lands in Pecos
County, TX.
b. An answer has been filed on behalf of the Company.
c. Management's intends to attempt to resolve this matter.

As of November 30, 2009, Exterra had $250,000 recorded in convertible notes
payable and $43,784 of accrued interest recorded in accounts payable and accrued
expenses related to this claim.

In addition to the above litigation, Exterra has been named in several cases
against Star of Texas Energy Services, Inc as mentioned in the 10-K for the year
ended May 31, 2009. The lienholders for various wells and leases owned by Star
of Texas have filed several cases against Star of Texas for payment of the
outstanding liens. Exterra has been named in several of these cases, however it
is management's opinion that the likelihood of a loss outcome to Exterra in any
of these cases is remote because Exterra never took ownership of the wells and
leases in question.

Management efforts to resolve all these matters will include litigation and
settlement negotiation.

ITEM 1A. RISK FACTORS

Not required

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Common Stock

During the six months period ended November 30, 2009, the Company consummated
the following transactions (shares issued for services and fees have been valued
at the market price of the Company's stock on the date the equity issuance was
authorized):

06/26/2009 Issued 15,000 common shares valued at $3.00 per share in payment
for services and fees to third parties

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The following listings of corporate debt are in default:

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

31.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

10.1 Loan Agreement, dated as of September 14, 2009, between Exterra Energy,
Inc., a Nevada corporation, Robert Royal and Todd R. Royal and Happy State Bank,
a Texas banking corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Exterra Energy Inc.

By: /s/ Todd R. Royal
---------------------------------------
Todd R. Royal
President, Secretary, and Director

Date: January 14, 2010